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Travel industry news

04 Apr 2019

BY Gary Noakes

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Saga changes travel strategy despite profits rise

Saga Group has mapped out a change in its travel strategy despite record profits for the sector in 2018.

Saga Spirit of Discovery.jpg
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Saga reveals change of strategy to counteract group profits dip

Travel was a bright spot among Saga Group’s 2018 results, with the division achieving a record £21.1 million pre-tax profit for the year ending January 31, up 2.4%.

 

Travel revenue rose 1.9% to £457.4 million, but passenger carryings were static at 176,000.

 

Overall, Saga Group saw underlying profit before tax fall 5.4% to £180.3 million.


Group chief executive Lance Batchelor said results were in line with expectations, but added: “The long-term challenges we face and the results demonstrate that Saga cannot grow without a clearly differentiated offering to its customers."

 

In travel, this will mean more of a focus on cruise and “differentiated experiences”.

 

“Our strategy in Tour Operations will be to accelerate our move away from undifferentiated, low value products, such as short-haul, to higher value, more differentiated segments such as escorted tours, third party cruises and river cruises.

 

"We are starting to renew our river ship fleet, and have recently ordered two purpose built vessels on long-term lease agreements.

 

"While we do not expect significant growth in tour operating revenues, this forward transformation is expected to lead to improved margins in the next few years.”


Saga has already reduced its short-haul offering in favour of higher margin ocean and river cruises and escorted touring.

 

Its first purpose-built ocean cruiser, Spirit of Discovery, will carry its first passengers in July, with a second ship, Spirit of Adventure, following in summer 2020.

 

Saga said they are each expected to deliver about £40 million EBITDA (earnings before interest, tax, depreciation and amortisation) per annum.


“This will be transformational for the future profit trajectory of our travel business,” it said.


Saga added that Brexit “is putting a clear dampener on customers’ willingness to commit to holidays in 2019”.

 

Tour operating revenue for 2019/2020 is currently down 3.4% “and has been impacted by the recent market weaknesses, particularly in short haul holidays”.


Saga said cruise ticket revenues and passengers for 2019/20 departures were up 17.7% and 17.8% respectively.

 

However this reflects the requirement to fill the additional 999-berth capacity of Spirit of Discovery, as the Saga Pearl II exits service. The increase in capacity days amounts to 19%.

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Saga has been creating holidays and cruises exclusively for over 50s for more than 60 years, with incredible destinations, memorable experiences and fantastic value at the heart of what we do.

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